WASHINGTON — The Federal Reserve opened a new chapter Thursday in its efforts to stimulate the economy, saying that it intends to buy large quantities of mortgage bonds, and potentially other assets, until the job market improves substantially.
This is the first time that the Fed has tied the duration of an aid program to its economic objectives. And, in announcing the change, the central bank made clear that its primary reason was not a deterioration in its economic outlook but a determination to respond more forcefully — in effect, an acknowledgment that its incremental approach until now had been flawed.
The concern about unemployment also reflects a significant shift in the priorities of the nation’s central bank, which has long focused on inflation.
Inflation is now running below the Fed’s 2 percent annual target. But with the unemployment rate above 8 percent, the Fed’s policymaking committee suggested Thursday that it might tolerate a period of somewhat higher inflation, promising to maintain stimulus efforts “for a considerable time after the economic recovery strengthens.”
“The weak job market should concern every American,” the Fed’s chairman, Ben S. Bernanke, said at a news conference.
The goal of the new policies, he added, “is to quicken the recovery, to help the economy begin to grow quickly enough to generate new jobs.”